Goldman recently outlined countries and their progress in eliminating cash transactions. It is often believed that technology is the driver for the demise of cash:
However, the availability of technology alone has not ensured the demise of cash. As the following chart shows, there are several advanced economies in which it is still the dominant mode of payment in volume terms (surprisingly quite a few European countries are in the bottom left quadrant).
Japan is a striking example of this; lots of tech and lots of cash.
The US also stands out, and this could at least partly be attributed to the fact that regulators in the US have explicitly stated that the market should manage the shift to digital payments by itself.
On the other hand, Scandinavian countries are on the cusp of becoming some of the first cashless societies, as a result of industry-co-ordinated steps and government initiatives. Swish, a payment app developed jointly by the major Swedish banks, has been adopted by nearly half the Swedish population, and is now used to make over nine million payments a month. About 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits and many, especially in rural areas, no longer have ATMs. In conjunction with that, cash transactions were just c.2% of the value and 20% of the volume of all payments made last year (down from 40% five years ago).
Denmark’s move to a cashless society is a deliberate result of policy, with the government removing the obligation for some retailers to accept payment in cash.
Without this legislative push, we believe cash is very difficult to disrupt and substitute. After all, it is a free and convenient mode of transacting. So far, the selling point of the most broadly used alternatives to cash (cheques and cards) is greater convenience. But that hasn’t been sufficient to meaningfully reduce the market share of cash in countries outside Scandinavia and Canada.